Fed Chairman Haimark: "Interest rates should be frozen until next spring... Inflation remains unstable"

The president of the Cleveland Federal Reserve Bank, Beth Hammack, stated that the current interest rate should be maintained at least until next spring. This seems to be based on a judgment that, compared to a hasty easing of the monetary policy stance, there is a greater need to further observe the trends in inflation and changes in the economy.

In an interview with The Wall Street Journal (WSJ), President Hamak diagnosed that the current benchmark Intrerest Rate is slightly below his estimated neutral rate. The neutral rate refers to the ideal interest rate level that does not trigger economic overheating or contraction. In comparison, the lower benchmark rate indicates that the current monetary policy still has a stimulating nature for the economy. This is interpreted as the Fed's concern that if rates are lowered too quickly, it could disrupt the trend of price stability again.

He specifically pointed out that inflation has been hovering around 3% for the past 18 months, and it is expected that by the end of the first quarter of next year, a clearer understanding of the impact of tariffs on the supply chain and corporate pricing trends can be grasped. Given that the current trend of slowing price increases may be temporary, concerns persist, and he believes that a policy shift should be approached with caution.

Additionally, he pointed out that the recently released November Consumer Price Index (CPI) increased by 2.7%, but it may have been affected by delays in data collection due to the federal government shutdown. He added that if the actual values were adjusted more accurately, they might be closer to the market expectations of 2.9~3.0%. This suggests that the actual price increase pressure may be greater than the official indicators.

Currently, President Hameck is a non-voting member of the Fed's monetary policy decision-making body - the Federal Open Market Committee ( FOMC ), but will have voting rights starting next year. In the face of the recent trend towards interest rate cuts within the Fed, he has maintained a distance and a cautious stance. His statements also indicate that there are differences of opinion within the Fed regarding the inflation path.

This trend can be interpreted as sending a signal: the likelihood of the Fed's interest rate policy shifting to a loosening phase in the short term is low. If price trends and employment indicators do not stabilize clearly after spring next year, the Fed is likely to maintain a tightening tendency for a period of time. This may also have a considerable impact on global financial markets.